When the term real estate is mentioned, you would normally start to think about rental houses, industrial buildings or commercial buildings. Well, the said assets are the most common ones but have you ever thought about land. Most people do not focus on land, but it can be a productive thing to invest in considering you get your moves right. But why should you invest in land how can you make profit from it? Read on and find out more;
Why Invest in Land?
Some facts and features of land make it a favorable investment once you understand them. One main one is that it is a limited resource and the more the world is becoming populated, the more its value is increasing. This makes it exclusively attractive as an investment option. Aside from that, you do not have to maintain land, and it will still appreciate if you let it lie idle. It can be divided into small portions, and you do not need to start your investment with a huge parcel. It all depends on the amount of money you have as you can start small and scale up with time.
Some few reasons why you should consider land as an investment have been mentioned, but the real question is how you can maximize your properties. Read below and see the tips on how you can do it effectively;
Apply the Buy and Hold Strategy
This is similar to how the stocks are traded but the time in question when investing in land is longer. If you look at the price of land in your area ten years ago and compare the prices now, you will see that land has a steady appreciation rate. You can even predict how much land in your area will cost after a couple of years. Investors who want to make profits find land at low prices and buy them. However, this should be considered as a long-term investment in that they are required to hold on to that land for an extended period until it is deemed to be valuable enough. The rule with this strategy is straightforward, the longer you hold on to the land, the more you will reap as profit.
Keep in mind that various areas have different potentials and you need to analyze a piece of land and determine its profitability. Some key things to look at include the current and future location trends, proposals for the development of commercial structures and natural formations among others.
The previous strategy has been seen to be a way of getting profits in the long term, but land does not always have to traded that way. You can utilize the quick sales strategy and get some money out of it. When trying to buy land, you will notice several bids presented to a property and you can buy and sell some land very fast. The key to making a profit this way is through buying the land with cash so that you can get it a lower price than those relying on loan and deferred modes of payment. Sellers like buyers who have cash and you can negotiate huge discounts when buying before you sell to the others at regular prices.
Improve The Land
While bare land appreciates steadily over time, you can do one or two things to improve its value further. Property that has utility lines installed will command a higher price in the market. When considering this way as an option for maximizing profits out of your land, look at the location as it determines the amount of money you will have to part with for the utilities to be installed. If you are lucky, you will get land in a location where electric lines and water lines are added for no cost. These additional features will cost you some money but make it easier to sell the land and at a higher price. Places that are close to the urban areas are better placed for such improvements as these utilities will be close by. If you do not want to add the utility lines, you could clear the land and level the ground to make it ready for one to build their home. This can be a huge selling point as the buyer won’t have to spend money on landscaping and will start to develop their home right away.
Watch The Economy
While this is not a very reliable way of going about it, you could time when the economy is doing poorly and buy land during this period. Land is cheap during the recession and expensive when things get back to normal. However, this does not happen all the time, and you should examine the local economy before making a move. If you get your analysis right, you could get as much as forty percent a few years down the line when the economy recovers.
Develop The Land
The best way of maximizing profits on land is by developing it. However, this limits so many people since the cost of buying land and building a home on it is high. If you buy land, run the utility lines, build a house and sell it, you will make a lot of money in profits. When developing the home, ensure that you build one that is in demand at that time and not find yourself stuck with one that no one wants to move in or buy. If the land is located near an urban center, you could decide to put up commercial property but this will require some more money.
It has been seen that land can be a lucrative investment, but you need to have a plan set for it first. One thing that you should ask yourself before buying it is why it is vacant. Find out more about an area and the land you want to buy as some concerns about certain areas make investors avoid investing there. Ensure you spend on land that is located in a place with no major issues so that you can eventually recoup your investment and profits when you decide to sell it.